Credit Information Sharing (CIS) is a risk management tool through which financial institutions may justifiably divulge information about their customers without breaching their duty of confidentiality, which is one of the key tenets of the relationships between financial institutions and their customers.
The CIS initiative in Kenya is, however, faced with the risk of litigation, particularly in cases where adverse reports have led to decisions unfavourable to a customer seeking credit facilities. Left unchecked, these disputes could reverse gains made towards addressing the challenge of the non-performing loans portfolio that led to the collapse of financial institutions in the 1980s and 1990s.
Currently, a typical court case can take three (3) years or even more before it is concluded at a hefty cost to the consumer as well as the financial institution, while the issue could have been amicably resolved within a week through mediation. It is estimated that nontechnical cases can be mediated and concluded within a day. The ADR approach will provide a valuable option for both customers and financial institutions, creating a conducive environment for issues to be addressed while upholding the relationship between the parties. Additionally, correction of erroneous information held by the CRBs will contribute to improvement in data quality.